Defaulting banks - where will it stop?

[Jan Klimkowski]

The trillion-dollar carcass of Lehman is rotting away and noone knows where the money has gone.

The article claims Lehman debtholders may recover nine cents to the dollar. That sounds optimistic to me..

Lehman task 10 times worse than Enron, say administrators





* Simon Bowers
* guardian.co.uk, Friday November 14 2008 18.29 GMT
* Article history

Adminstrators grappling with the European arm of failed investment bank Lehman Brothers have told creditors their task is "ten times as big and as complicated" as the unwinding of Enron.
Speaking after the first creditors meeting, a team from PriceWaterhouseCoopers said they had identified more than $1tn in assets and liabilities which need to be accounted for.
At the meeting, held behind closed doors in a conference hall at the O2 dome, lead administrator Tony Lomas told hundreds of representatives and lawyers who attended that he had recovered about $5bn out of a potential $550bn of obligations owing to creditors. A further $22.3bn of client assets had been identified, all of which will be returned to their owners.
He drew a comparison with the administration of US energy trading group Enron, which collapsed in 2001, noting that some of his colleague were still working on unresolved elements of that administration.
Lomas said the Lehman administration had already slipped behind schedule because of delays in receiving confirmation from third parties believed to be holding assets of Lehman Brothers International (Europe).
"The balance sheet position will be north of $1tn and we've got a long way to go before knowing what the position is for creditors and, if there is a shortfall, just how short it will be," Lomas said after the meeting. "The prospect is that some creditors will lose money. How much? We can't determine that for a significant time."
PWC has already identified more than 400 trade creditors to Lehman's European business, including Reuters, HSBC, Hewlett Packard, BT, the London Stock Exchange and Lufthansa. Even PWC is listed among those owed money by the collapsed firm, as are the Bank of England and the Financial Services Authority. Meanwhile, the list of trade counterparties contains about 6,000 names.
About 100 creditors have applied for "hardship status" which could see their claims fast-tracked.
Parent company Lehman Brothers Holdings, once America's fourth largest bank, was forced to file for bankruptcy protection in the US in September after investors lost confidence in the business and the quality of assets on its balance sheet. It had been one of America's most active players in subprime home lending and related financial engineering.
The settlement of Lehman credit insurance contracts linked to the bank's bonds suggested debtholders could expect to recover less than nine cents in the dollar.
About 1,500 Lehman staff in Europe lost their jobs or resigned as the bank went bust. A further 2,500, mainly at the group's Canary Wharf offices, became employees of Japanese bank Nomura, which quickly bought the bank's European and Middle Eastern equities and investment banking operations out of administration in September. Another 1,100 ex-Lehman staff have been kept on by PWC.

http://www.guardian.co.uk/business/2008/...anbrothers